7 Biggest Mistakes When Getting a Personal Loan

7 Biggest Mistakes When Getting a Personal Loan

Because slacking off here can cost you big-time.

By Elizabeth Best | 13th January 2016

1. Not shopping around

When looking for a loan, many people will just head to their regular bank and apply for whatever is on offer there and then. They’ve done right by you up until now, so what’s the harm? Well, you know when you buy an amazing pair of shoes, and then you see the same pair an hour later for a way better price? That can happen with loans. It pays to shop around to make sure you’re getting the best deal before signing on the dotted line. Take a little longer to choose your loan rather than just going with what you know, and it could save you much stress later on.

2. Not checking your credit file

Did you know that you’re legally entitled to access your credit file for free? The banks will use this file to decide how much money to loan you and at what rate, so make sure their ruling is based on correct information. And if it turns out you don’t have a very good credit rating, you can try and sort it out BEFORE applying for the loan.

3. Not reading the loan fine print

When you sign your contract, you are legally telling the bank that you understand and agree to everything. Don’t skim through it like your iTunes terms and conditions: there will be important terms you probably need to know buried within all that legal mumbo jumbo, such as whether an interest rate increases after a certain time period, or whether there’s a fee for paying back your loan too early. A good lending specialist will usually advise you of all these terms upfront, but just in case they don’t, or they miss something, it’s good to get schooled yourself.

4. Getting emotional

Emotions have no place in banking. Sure, you might have noble reasons for getting a loan (helping family members, getting married), but emotions can lead to you overextending yourself in terms of what’s reasonably affordable for you. Really think about what you can afford and don’t let the purpose sway you. You have to be super logical when it comes to money to avoid a huge mess down the track.

6. Overextending yourself

We’ll say it again: don’t overextend yourself. Some bad lenders may be responsible for irresponsible payment terms, but at the end of the day it’s up to you to ensure you can afford to meet the repayments. The good news is that personal loans are usually pretty flexible, allowing you to choose how much you borrow, over what term you’ll pay the loan back, and what regular repayment amounts and interest rates you’ll be held to. Remember to budget for rate increases when it comes to variable rates, and don’t borrow more than you’re able to repay comfortably.

6. Lying

Don’t lie. Just don’t. The rules are there to assist banks in deciding whether or not someone will be able to pay back the loan. Lying could lead to you overextending yourself, which we already know is a bad idea. Plus, banks have many checks and balances in place to help uncover fibs so you could find your loan cancelled and have a hefty fee lumped on top of it all. Just don’t.

7. Not asking questions

If you’re going to borrow cash, you NEED to ask questions. In addition to loaning you money, lenders are there to give you advice, so take advantage of their knowledge and make sure you know everything about the deal before it goes through. It can literally pay to voice your concerns and thoughts here, as probing further could unlock better rates or terms for your specific purpose.

CommBank
www.commbank.com.au

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Article by Elizabeth Best

Elizabeth is the former Digital Editor of Style Magazines. She knew she wanted to be a journalist from the age of six and has spent the past decade working for some of Australia's top publications. She also thinks mint chocolate is a gift straight from the heavens.

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